In an uncertain job market, how can companies retain workers?
Reports of layoffs have cast a shadow over the recent surge in quitting. Tech behemoths like Amazon and Meta and, most recently, Dell and Microsoft have led the way in cutting jobs, along with companies like Blackrock and Goldman Sachs. Layoffs are planned at Mcdonald’s, as well.
In absolute terms, resignations still far outnumber reductions — people are quitting at three times the rate of layoffs, said Anthony Klotz, an associate professor of organizational behavior at the University College London’s School of Management. He coined the term the Great Resignation.
Indeed, the U.S. Labor Department’s January jobs report said employers had added over 500,000 jobs, exceeding expectations and bringing the unemployment rate down to 3.4%, the lowest since 1969.
Nonetheless, frequent headlines of workforce reductions across industries may be having a cumulative effect on the collective labor market psyche. Although some workers — even unhappy ones — might decide to stick with their jobs when the market appears uncertain, news of layoffs can, conversely, spur more quitting.
Layoffs “create an environment where people worry it might happen to them next,” said Laszlo Bock, who was Google’s senior vice president for people operations before helping found the human resources platform Humu.
Poorly handled reductions may “degrade trust in management as people start hearing rumors of further cuts,” he said, and “that in turn raises anxiety, which causes more people to quit.”
The most recent data shows that while quitting has slowed, it still surpasses pre-pandemic numbers, Klotz said. The number of people quitting peaked at approximately 3.4% of the workforce early in 2022; by November it had fallen to 2.9%. While that may not sound significant, it translates to more than 4 million workers per month.
As a result, companies in a range of industries are taking steps to discourage departures and retain talent. Creating mentorship programs; prioritizing diversity, equity and inclusion efforts; and hiring career development officers have become standard practice at many larger companies.
Spurred by a competitive labor market and increasing transparency in many industries, companies are now viewing competitive compensation and benefits as necessities.
Changes like these have, in reality, created a new floor as to what employees can expect — so these changes won’t necessarily solve attrition issues.
Donald Sull, a senior lecturer at the MIT Sloan School of Management, was a co-author of a study of attrition that examined a period between April 2021 to September 2021, incorporating employee reviews from Glassdoor, a jobs website. The study found that corporate environment ranked as the top factor in employee retention.
A toxic corporate culture was “10 times more predictive of having a higher-than-industry-average attrition rate than compensation,” Sull said. While there is no standard definition of a toxic culture, it can involve a lack of respect for employees, a noninclusive environment, unethical or cutthroat behavior and, most strikingly, abusive management, he said.
Sull and his son Charles founded Culture X, a firm that focuses on improving corporate environment.
Klotz said leaders needed to be listening to their workers. “They need to ask, ‘How are you experiencing the late pandemic, the cost-ofliving crisis and other things going on in your life?’” Managers should be checking with their employees in oneto-one conversations and with large-scale questionnaires, he said.
Ultimately, corporate leaders need to follow their company’s value statements. “We compared how heavily companies weighted the values in their public statements versus how employees assess them in terms of how well they did on those very values,” Sull said of his study.
It found that companies that preached values most loudly didn’t necessarily practice them.
Companies where leaders practiced their values “are the exception, not the rule,” he added.